Whether you are a first-time renter who is learning about insurance for as a beginner or a long-time renter who has questions, it is important to understand the coverage you are getting. Some renters choose not to take out renters insurance because they think it is unnecessary or too expensive. Other renters are under the wrong assumption that their belongings or any property damage is covered by the landlord’s homeowners insurance. Here is why you need renters insurance and what it covers.
What does renters insurance cover?
Renters insurance is coverage for your belongings in an apartment or home that you do not own. It covers items such as furniture, electronics, clothing, shoes, books and other things. In general, this type of insurance extends to personal property, liability, living expenses after a disaster and payments to others after an accident.
Your personal property is the items that you own that do not belong to a landlord. Liability refers to coverage you receive if someone is hurt on your property or if you damage someone else’s property. Living expenses are what the insurance company will pay you if your home is no longer habitable. Payments to others are medical expenses for someone who is hurt in your home.
A helpful way to track what you need insurance for is to use an inventory app and photograph all of the items. A software program makes it easier to find what you need in case of an emergency and lowers the risk of you losing the inventory after you are done making it. You can add the original prices you paid for items,
It is important to understand that underinsuring your belongings can be risky. Although you may be motivated to save money and exclude items, not having enough coverage can turn into a problem after an accident or crisis. You have to consider your ability to replace certain items without insurance.
What does renters insurance not cover?
Renters insurance does not provide coverage for everything. For example, when you rent a property, it does not cover the exterior of the building or other parts that belong to the landlord. In general, renters insurance does not cover the structure you live in, but your landlord should have insurance for this.
Usually, earthquakes or floods are not included in renters insurance. You have to purchase them separately. Some companies allow you to add earthquake coverage for an additional fee, but this varies. FEMA usually sells flood insurance.
How much does renters insurance cost?
The average cost per year for renters insurance is $188. However, rates can vary from $140 to $285 because each insurance company sets their own prices. Your rate will also depend on the type and amount of belongings you have and your location.
Your costs will also depend on the type of insurance you get. There are two different types of renters insurance: actual cash value and replacement cost value. Actual cash value is usually cheaper because it accounts for depreciation of an item. For example, if you paid $100 for a table five years ago, actual cash value would only pay you $50 because of depreciation.
Keep in mind that many companies will let you split annual payments into monthly ones, so it is easier on your budget. Some insurance companies may charge a small fee for monthly payments.
Is renters insurance compulsory?
Renters insurance is not compulsory, and you are not forced to buy it by state laws. However, your landlord may have a policy that requires it. Your lease agreement may have a section that forces you to have this type of insurance, so make sure you read it carefully.
The reason why landlords require it is because it protects tenants and lowers the chances of them asking the landlord to pay for personal things after a disaster. It eliminates the possibility of future disputes over personal property.
Is renters insurance worth it?
You can use a budgeting app to figure out how much renters insurance you can afford per year and per month. It is easy to see how insurance can fit into your budget this way and its actual worth. If you prefer to use paper and pencil, invest in a large notebook that helps your track monthly expenses. When you consider the low cost of most renters insurance plans, it is better to buy it and have peace of mind.
It is important to consider all of the benefits of having renters insurance, such as the inclusion of liability coverage. If someone is injured while visiting your home, it covers the accident. Liability coverage also extends to damage done to a neighbor’s property in the event of an accident or disaster that happens on your property. You get comprehensive protection for a small monthly premium, which makes renters insurance worthwhile.